Noted fund manager Roger Montgomery has highlighted the potential in the Webjet Limited (ASX: WEB) share price.
In an article, Montgomery says he sees opportunity among travel companies on the ASX. Despite a clampdown on domestic and international travel, the article suggests these businesses are poised to thrive once travel opens up again.
According to Montgomery, travel shares, in general, tend to bounce back quickly, presenting a "glaringly obvious investment opportunity". In particular, Montgomery noted Webjet shares could benefit greatly as the economy re-opens.
Let's take a closer look.
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Poised to recover?
In the article, Montgomery differentiated travel shares according to two criteria. The first considers whether the company is 'broken'. The second criteria evaluated how well the company is poised to benefit from a recovery in travel.
According to the fund manager, Webjet's capital raising in April 2020 addressed the first criteria. The company raised $231 million from institutions and another $115 million from retail investors. A successful capital raising marked a low point for the company and provided Webjet with some cash to keep it afloat.
In reference to the second criteria, Montgomery pointed to the recovery in Webjet's share price in November 2020. Shares in the travel company rallied on the news about vaccine efficacy levels. This strong recovery in the Webjet share price satisfied the fund manager's second criteria as having great potential as travel re-opens.
In addition to Webjet, Montgomery also noted fellow-listed travel companies, Flight Centre Travel Group Ltd (ASX: FLT) and Corporate Travel Management Ltd (ASX: CTD) as having potential upon recovery.
Snapshot of the Webjet share price
Webjet is a leading online travel agency. The company allows customers to compare and book a range of domestic and international travel options. These services include flights, hotel accommodation, holiday package deals and car hire.
Since the start of the year, the Webjet share price has remained relatively flat.
Despite the lacklustre performance, shares in the online travel company have traded in a volatile range. With COVID-19 induced lockdowns hampering domestic borders, the Webjet share price has fluctuated accordingly.
In addition to Montgomery's fund, analysts at noted broker Goldman Sachs also see potential in the Webjet share price. Recently, analysts from the broker suggested the Webjet share price is a buying opportunity for patient investors.
Although Webjet has underperformed, analysts believe the company is well positioned for long-term growth.
